Whether you want to switch business ventures or your investments aren’t paying off, sometimes it’s worth it to sell your rental property. But what if you are still housing tenants? Luckily, there are ways for landlords to sell a property, even if tenants are living there. So if you’re wondering how to give notice of intent to sell your rental property to current tenants, just keep reading.
Can You Sell a Rental That Is Occupied?
Yes, you can sell a rental property that is occupied. However, when you sell a rental property with tenants in place, the lease and security deposit also transfer over to the new owner. This is because rental leases are considered to be part of the land. When a rental property sells, the lease and other obligations become the new owner’s responsibility.
That said, there are certain benefits and disadvantages to selling an occupied rental property. For instance, some investors are willing to pay more for a rental property with tenants already in place. However, selling an occupied rental can take a while since you’re primarily marketing toward investors.
Additionally, some tenants may become upset when they learn the rental is for sale. However, as hard as it is to tell your tenants, some landlords find it more beneficial to sell a rental property when things aren’t going as planned. If you want to know why some investors choose to sell their rentals, let’s go over some of the most common reasons.
Common Reasons to Sell a Rental
Landlords decide to sell rental properties for several reasons, like financial decisions or major life changes. Although there are several benefits to having rental properties, sometimes rental owners have to cut their losses and sell while there’s an opportunity. For instance, here are some common reasons landlords sell a property.
- You Don’t Want to Be a Landlord
- It Needs Expensive and Large-Scale Repairs
- Keeping High-Quality Tenants is Challenging
- Property Value is High or Low
- The Neighborhood Has Changed
You Don’t Want to Be a Landlord
Not everyone is cut out to be a landlord. In fact, many property owners can quickly become overwhelmed with the endless responsibilities and tasks required to manage a rental property. Additionally, some people become “accidental landlords” by inheriting a property without intending to be a long-term landlord.
Therefore, selling a property is a viable option for those who don’t want to commit the time and effort to manage a rental property. However, if you do want to make your rental business work, Philadelphia property management can help manage your rentals.
It Needs Expensive and Large-Scale Repairs
If your property expenses outweigh your profits, it can be a troublesome situation for landlords. For instance, if your rental needs new flooring, a new roof, and other major repairs throughout, it can cost thousands of dollars. Unfortunately, your rental income can only cover so much of the repairs. Therefore, sometimes selling the property is financially smarter for your ROI.
Keeping High-Quality Tenants is Challenging
Rental businesses and landlords thrive on consistent rental income. Finding high-quality tenants that pay in full and on time each month can be challenging. Additionally, the eviction process for bad tenants is expensive and time-consuming. As such, landlords that have difficulty keeping good tenants may consider selling instead of risking vacancies.
Property Value is High or Low
Not every reason for selling a home is bad. For instance, if your property has increased in value, maybe you’ve decided it’s time to cash in. However, your property could also decrease in value. If this is the case, you may want to sell the property and keep the profits or invest elsewhere. If you’re going to explore the current market conditions to determine whether or not to sell your home, check out this free online home value estimator.
The Neighborhood Has Changed
Location is one of the most important factors in a rental property. The neighborhood and community can set the tone for prospective tenants, rental rates, taxes, and appreciation rates. As such, if the neighborhood was once a great investment location, but it’s started to decline rapidly, it could be time to sell and get out. Staying on top of market trends is crucial for investors to keep rental locations successful.
How Do You Give Notice of Intent to Sell?
If you’ve decided it’s time to sell your property, there are several things you must do–especially if tenants currently live there.
Selling a vacant property is relatively easy and straightforward. However, when tenants live there with a lease in place, the process gets tricky. That said, it’s crucial to brush up on tenant-landlord laws and requirements in your state before starting the selling process.
First, it’s important to note that your lease should have a termination clause. A termination clause allows landlords to terminate the lease under certain conditions, like wanting to sell the property. However, not all leases have a termination clause, so selling a property can be a bit more complicated than that.
That said, if your lease doesn’t include a termination clause, here’s what you need to do to sell your rental property with current tenants.
4 Essentials for Giving Tenants Notice of Intent to Sell
Before you give notice of intent to sell, keep in mind that your tenants may react differently than you expect. For instance, your tenants may be worried that they have to move, uncomfortable with property showings, or worried about finding a new landlord or property manager. As such, landlords must approach the situation calmly and respectfully by following these steps:
- Be Honest and Transparent- Talk with your tenant as soon as possible to let them know what’s going on with the property. It’s important to keep communication open and honest during this time.
- Explain the Lease and Security Deposit- Your tenant may be worried about the lease agreement and security deposit, so let them know that they will transfer over to the new property owner. You can also remind tenants of local landlord-tenant laws, so they don’t feel worried about having a new landlord.
- Review the Lease Terms and Laws- Go over the lease terms with your tenant to remind them of their rights. Your lease should tell you how much notice you need to give tenants before entering the property for a showing. Additionally, try to work with tenants to find dates and times that work best for your schedules.
- Offer Incentives- If your tenant is willing to cooperate with the property sale, consider offering an incentive, like a gift card or free property cleaning. Or, if your tenant’s lease is about to expire before the sale, offer to help them find a new place to live.
What Information to Include in Your Notice
You must include some specific information within your notice of intent to sell. Your letter to notify a tenant should contain concise, easy-to-understand terms that give them the selling details. Here are some topics you don’t want to forget to include:
- Provide identifying information, like your name, the date, tenant(s) names, and the property address.
- Provide notice that the property is being sold, and the lease will transfer over to the new owner.
- Let your tenant know much notice will be given before a property showing, according to state landlord-tenant laws.
- Tell tenants that prospective buyers will be accompanied by a real estate agent or licensed real estate professional.
- Thank your tenant(s) in advance for cooperating with the sale and property showings by keeping their rental property clean and tidy.
- Include any incentives you’re offering in your letter as well.
Tenant Rights When a Rental Is Being Sold
If you’re selling a rental property with tenants currently living there, landlords and tenants need to know their rights. In fact, ignoring tenant rights can lead to delays in property sales and potential fines for violating landlord-tenant laws. So to avoid financial mishaps, here’s what landlords and tenants need to know.
- Know the Law
- Stay If You Want and If You Can
- Notice of Entry for Showings
Know the Law
If you’re feeling weary about your landlord selling the property, make sure to review your lease agreement and local laws regarding renter-occupied property sales. Although it’s ultimately the landlord’s responsibility to inform tenants, renters can still learn more about the process and laws involved through research.
Stay If You Want and If You Can
Just because the property is selling, that doesn’t mean tenants have to move out. However, if you have a termination clause within your lease agreement, the lease typically ends when the property sells. If you don’t have a termination clause, the lease and security deposit get transferred to the new property owner. As such, tenants can remain in place and continue to rent from the new owner.
Notice of Entry for Showings
If you’re selling a property that tenants currently live in, you must give them notice before showing the property. Usually, you’ll want to let them know 24-48 hours in advance before entering the rental. If it’s possible, work with your tenants to find a day or time that works best with their schedule.
4 Tips for Giving Current Tenants Notice of Intent to Sell
- Work with tenants to find dates and times to show the property that works best with everyone’s schedule.
- Offer to help the tenant find new housing if the new property owner doesn’t renew their lease.
- Keep up with maintenance requests and ensure your tenants are up-to-date with rent payments.
- Offer your tenant an incentive to leave during property showings to avoid awkward run-ins with prospective buyers.
How Can Property Management Help?
Landlords who don’t have the time or patience to manage rental properties can find it difficult to run a successful rental business. As such, this situation leaves landlords wondering whether it’s worth it to keep renting or sell the property. However, check out some of your management options before you decide to sell.
Bay Property Management Group offers comprehensive rental services to landlords, no matter how many properties you own. Our complete services include tenant screening, maintenance, rent collection, and more. Contact BMG today if you need rental management services in Baltimore, Philadelphia, Northern Virginia, or Washington DC.
